Contents India Growth Story Telecom leading infrastructure growth in India Mobile broadband service is the way forward Mobile broadband catalyst for changing business dynamics Key Enablers for driving uptake of mobile broadband
India is the largest democracy in the world with a population of over 1.2 billion. In the past 2 decades, India has seen sustained high economic growth. Currently India is the 4th largest economy behind US, China and Japan in PPP terms. Between 2007 and 2020, India’s GDP per capita in USD terms will quadruple, and that the Indian economy will surpass the United States (in USD) by 2050 Source: Goldman Sachs
Comparison of GDP
India is less export oriented amongst BRIC nations
Pre and post liberalization
Services, Inbound Investment and Consumption Driving India’sGrowth Services-India’s services sector stands out for the size of its contribution to GDP and its dynamism. Communication and banking are among the fastest growing segments. As per Confederation of Indian Industry, services sector accounted for 59.6 per cent of the overall average growth in GDP in the eight years between 2000-01 and 2007-08. Foreign Direct Investment- Indian policy on FDI has been liberalised progressively over the last two decades. Initiatives have included opening up of new sectors to FDI, raising the FDI caps in sectors already open to investment and procedural changes to enhance FDI flows. Some of the sectors that have attracted the biggest share of FDI include services, telecommunication, computer software & hardware and housing & real estate and power.
Consumption India has a burgeoning middle class, which is estimated to be around 300 million. Two-wheelers and passengers vehicles in India-6.2 million units in FY 2003 to 11.4 million units in FY 2009 20-29 age group there will be over 210 million people by 2015 India’s private domestic consumption as share of GDP, at 57 per cent in 2008. Source: Mckinsey Global Institute
Infrastructure is the biggest challenge as well as opportunity Power deficit, Under capacity in the port sector, Investment backlog in railways Low penetration of broadband services in India Rs.22.5 trillion in infrastructure during the 11th five year plan (2007-2012) Rs.2.9 trillion in Telecom Sector alone. 12th five year plan to need Rs. 46 trillionin infrastructure as estimated by planning commision.
Telecom leading infrastructure growth in India
Facts of Telecom industry The telecom market has been growing at a CAGR of approximately 30 percent since 1995. Mobile services which have grown at a CAGR of more than 117 percent during the period 1995-2009. Indian telecom service sector contributed approximately 2 percent of the GDP in FY 2008-2009 and expected to grow further. The telecom subscriber base- 601 million as of April 2010(Second largest telecom market) The teledensityhas grown from a mere 1.3 percent in 1995 to over 50 percent asof April 2010. Due to presence of 8-9 operators per circle the rates are one of the lowest.
Global Majors Mobile Service Provider: Etisalat Batelco Telenor NTT DoCoMo Manufacturing Operations in India: Flextronics Ericsson Nokia LG Motorola
Mobile services driving telecom growth The mobile services have been growing at CAGR of 65 percent over the last 5 years. The total number of mobile subscribers surpassed the total wire line subscriber in 2004 Since 2004 wire line service has been experiencing negative growth.
More than 500 million un-served population located mainly in rural areas with moderate to low capacity to pay for the telecom services.
Factors favoring the growth: extremely low tariffs, availability of ultra low cost handsets, encouraging regulatory environment, increasing income levels and change in consumer behaviour
Composition of Data Revenue – Indian GSM Industry
Non-availability of broadband is an impediment to growth ofdata services High cost involved for both the operators and subscribers During 2005 to 2009 Wire line broadband growth: 7 million Mobile subscribers: 14 million(monthly additions in 2009)
Cause Analysis: An opportunity for Mobile Broadband Least broadband penetrated markets with current penetration of less than 1 percent. Low PC penetration Limited wire line infrastructure High tariffs Limited presence in rural area. The legacy wireline infrastructure is not scalable for providing high speed broadband services
wireless based broadband Review 149 million mobile subscribers 2 million data card subscribers Lack of high speed access to data through current GPRS, EDGE and CDMA 1X technologies deployed in India.
India striding towards mobilebroadband services Rs.1.06 trillion revenue from 3-G auction. BWA(Broadband wireless association) and 3-G services to be launched. 3G will drive mobile broadband in India for next 3-5 years services
wireless broadband using technologies like TDD LTE / WiMax are more likely be an economic alternative for the expensive wireline based broadband services
Mobile Broadband Service : The Way Forward
Catalyst for business-model innovation
Enormous long term potential
Phenomenal potential in healthcare, retail, financial services and so on.
Driving factors in India
Demand side factors
Supply side factors
Demand Side Factors
600+ million subscribers
Availability of low cost handsets
Lack of availability of broadband services
Existing 3G enabled handsets
Young demographic profile
High use of VAS by other sectors
Supply Side Factors
Better business case for wireless
Hyper competitive environment
Non-enterprise – Urban and Rural
Urban Costumer Segment
45% of Indians in urban areas by 2050
High propensity to pay for premium prices
Key Applications for Urban Segment
Internet browsing and Mobile Social Networking
Mobile banking and commerce
Rural Costumer Segment
Two-thirds of India's consumers in rural areas
Spending power increasing steadily
Mobile utility applications
Information related to farming
Remote access to education and healthcare
Enterprise Customer Segment
New delivery channels
New consumer markets
Mobile Broadband Services by Customer Segments
MBS Data Services Composition-2015
Mobile broadband catalyst for changing business dynamics
Brief Info Mobile broadband services are set to change the existing telecom market landscape in India following the launch of new services and emergence of new business models. Broadly from the standpoint of telecom industry, over the short term impact of mobile broadband services would be in form of additional business for engineering firms, network infrastructure firms and equipment vendors for rolling out the network. In addition, venture backed content and technology startups are likely to emerge. VAS value chain players (content developer, aggregator and technology enabler) are likely to call for investment to the tune of Rs. 12 billion over the period of 5 years ending 2015. Over medium to long term, service innovations and new business models will emerge to deliver advanced services for the media, health, education and other sectors.
Mobile Broadband Value Chain
Roles - MBS Value chain Players
High speed access- New revenue potential for content developer and aggregator In terms of service offerings, currently content is largely restricted to film based entertainment and cricket. Content owners will diversify content categories and new categories will emerge as the data usage increases, more importantly interactive content will gain in significance. Music and video services will be a key growth drivers, with a whole range of new music services like full track downloads. Additionally, Content owners will be focusing on providing relevant content in local languages as well. Content aggregator will offer rich media service for various customer segments based on their needs. Further, their focus will shift from current services like CRBT/Ring tones etc to rich multimedia, interactive and niche offerings. There is also large potential for providing wide range of utility and government services especially to the rural masses where the majority of new subscribers are expected to come from.
Fostering of New partnership Handset vendors will be partnering with content owner and content aggregators to embed various applications in their devices to create product differentiation. In addition handset vendors may also have bundling arrangements with mobile operators for the 3G enabled handsets to leverage mobile operator’s distribution reach. Mobile operators are increasingly using content /application brands to introduce new services for instance Aircel is promoting its internet access services by promoting easy access to Facebook through mobile.
Increased demand for both high-end and ultra low cost 3G enabled handsets and devices Handset vendors will be targeting entire segment of mobile broadband services subscribers through a range of access devices including netbooks and handhelds for high income users and ultra low cost 3G enabled handsets for low income users.
Revenue, Investment and Employment effects of Mobile Broadband The growth of mobile broadband services will manifest itself in terms of additional revenue and employment generation for the industry. In addition to these impacts auction of the 3G and BWA spectrum in India has generated Rs. 1.06 trillion for the Government Exchequer. The phenomenal take-up of mobile communication in India has driven revenues for mobile operators in India from Rs. 650 billion in 2006-07 to over Rs. 1000 billion in 2008-09 growing with rate of 25 percent.
Contd….. Following the rollout of the 3G services by the private operators in 2011, the 3G related revenue for the mobile service (excluding manufacturing) industry will witness significant growth. With high speed capability and better content based service offerings the rollout of mobile broadband services will give data usage the much needed impetus. The increased data usage on 3G network will lead to incremental 3G data service revenue of over Rs. 100 billion in 2015 growing at a rate of 112 percent between 2011 and 2015. Further, 3G mobile subscribers are expected to grow at a CAGR of 190 percent between 2011 and 2015, attributable to fall in the prices of 3G enabled handsets, availability of wider range of multi media services through 3G and reduced tariffs.
Contd…. It is expected that with the availability of 3G handsets priced below Rs.5000 the new subscribers as well as the replacement buyers will increasingly prefer to buy 3G handsets. The incremental revenue from 3G handset sales is expected to reach Rs. 670 billion in 2015 from Rs. 135 billion in 2010.
Incremental 3G Data Revenue
Impact on Value Chain Players Mobile Operators Total incremental data revenue from mobile broadband services for mobile operators is expected to rise to Rs. 67 billion by 2015. The growth of data revenue will be driven by both growth of the 3G subscribers and increasing demand for wide range of data services among subscribers. Mobile operators are expected to make a cumulative investment of Rs. 380 billion excluding spectrum costs between 2010 and 2015 to build the capacity to support the demand and increase coverage of 3G network
Revenue for Mobile Operators
Other VAS Value Chain Players Additional revenue from roll out of mobile broadband services for other VAS value chain players is expected to reach Rs. 35 billion in 2015 from around Rs.1 billion in 2011. Content developers will also benefit from a shift in the revenue sharing model in their favor after the launch of mobile broadband services. Further, with the rollout of mobile broadband services new opportunities will open up for the developer to sell new and innovative content related to interactive gaming, video streaming etc.
Revenue from other Value chain players
Handset Manufacturer Average handset prices have reduced drastically in recent times with setting up of local manufacturing plants by the handset manufacturers like Nokia, Sony Ericsson etc and the emergence of many local handset manufacturers in India like MicroMax, Karbon, etc. The Indian mobile handset industry would be a direct beneficiary of the growth in the 3G subscriber base. Launch of 3G services in India would allow handset manufacturers to generate incremental revenues of Rs. 135 billion in 2010 and further raise it to approximately Rs. 670 billion by 2015.
Revenue from Handset Manufacturers
Equipment Manufacturer Equipment manufactures will benefit from 3G network rollout by mobile operators i.e. new capital expenditure made by mobile operators for 3G services. Equipment manufacturers are expected to generate initial incremental revenues of Rs. 2 billion in 2010, which will further rise to Rs. 165 billion by year 2015. Growth led by 3G is expected to generate 10,000 – 12,000 new jobs between 2010 and 2015.
Revenue from Equipment Manufacturer
Benefit of Financial Services,Media & Entertainment, Agriculture and other allied sectors from mobile broadband
Financial Services Mobile based banking services enabling financial inclusion. The Future – Banking for the Un-banked using Unique Identification (UID) number and Mobile. Mobile based banking, a cost effective alternative.
Media and Entertainment Its various segments like film; television, advertising, print and digital among others have witnessed tremendous growth in the last few years. With a majority of the population between the age group of 20-30, and increasing disposable income in Indian households, the average spend on media and entertainment is likely to grow. Television, Music, Mobile Gaming and Advertising are the major segments to be affected.
IT and BPO services Information Technology (IT) is an important part of any telecom business and is critical for smooth functioning across the organization. With the proliferation of technology, telecom operators are looking for partners who can reduce costs and risk, move assets off their books, reduce their headcount, and enhance customer satisfaction. Indian mobile operators started the practice of outsourcing IT operations, which lead to predictable IT spending, improved cash flow, and optimized use of technology resources.